The transition to digital taxes in the UK is happening now, and in 2025, VAT becomes a key aspect of Making Tax Digital. Because of new regulations from HMRC and elevated standards, UK companies have to make sure they comply with each new set of rules.
Regardless of whether you’re a business following VAT procedures or if you work with clients on VAT, understanding the revised rules is crucial. This guide explains the information UK businesses need for VAT in 2025 and looks at how Making Tax Digital for Accountants is affecting the profession in 2022.
What is Making Tax Digital for VAT?
Making Tax Digital for VAT (MTD for VAT) forms part of the UK government’s plan to bring the tax system into the digital age. New HMRC guidelines are designed to make reporting taxes faster, easier and more useful for taxpayers by using technology and the internet.
Since April 2019, MTD for VAT has become compulsory for companies that are registered for VAT and whose taxable turnover is more than the VAT threshold (at present £90,000). In April 2022, the UK made it so that all VAT-registered businesses, regardless of how much they earn, use the scheme.
By 2025, compliance is expected practice, and you won’t be in compliance until it becomes standard practice. If a business is registered for VAT, it must use digital methods and MTD-approved software for filing its VAT returns.
Key Changes in 2025
Implementation is replaced by enforcement and integration in the year 2025.
- Tightened Compliance: HMRC is taking a harder look at compliance. If a business doesn’t meet MTD rules, it could receive penalties based on the new points system for missing deadlines.
- Improved Integration: Producers of software are making their offerings work more closely with HMRC to provide detailed and current insights and assistance with automation.
- Digital-Only Filing: Only digital submissions can be made for VAT returns from now on. You have to store your VAT records and returns solely online.
- Extended Support: HMRC is enhancing support resources and education for small businesses and sole traders adapting to MTD.
If your business is still using spreadsheets or manual methods, now is the time to upgrade.
Software and Digital Record-Keeping Requirements
To comply with Making Tax Digital for VAT, businesses must:
- Maintain digital records of sales, purchases, and VAT calculations.
- Use MTD-compatible software to submit VAT returns.
- Link systems digitally via APIs—copying and pasting figures manually is not compliant.
Examples of MTD-compatible software are Xero, QuickBooks, Sage and software that connects spreadsheets to the HMRC systems.
The main thing is to have a digital link between your records and your VAT return, which keeps everything more accurate and mistakes minimal.
Making Tax Digital for Accountants: Adapting to a New Era
MTD goes beyond regulatory changes for accountants and is really transforming the entire profession. Making Tax Digital is affecting the work accountants do, their methods of communication and the kinds of services they provide to their clients.
Key impacts include:
- Increased Automation: Software helps accountants reduce manual input, so they can work more in an advisory role.
- Real-Time Reporting: Accountants can now generate reports closer to the time, giving clients useful tips for cash flow and smart decision-making.
- Client Education: Accountants help clients move into digital practices, choose the right software and build processes that guarantee compliance.
Those accountants who accept this transformation notice their tasks are done faster, they have better relationships with clients, and they can also offer forecasting, budgeting and digital advice services.
Benefits of Complying with Making Tax Digital for VAT
Making Tax Digital may feel like a burden initially, but it offers tangible benefits:
- Greater Accuracy: Reduces human error in tax calculations and submissions.
- Faster VAT Returns: Automated processes streamline VAT return preparation.
- Better Financial Insights: Having your records digitally allows you to make smarter decisions whenever you need to..
- Improved Compliance: Reduces the chance of missing important deadlines or sending inaccurate filings.
- Environmental Benefits: The use of electronic processes leads to less paper printing and filing managed by people.
Such benefits help more than ensure compliance; they can improve how efficiently businesses conduct their operations.
Common Challenges and How to Overcome Them
MTD for VAT does have benefits, but not all businesses are sure how to tackle some of its challenges. Here’s how to deal with the most frequent issues:
- Lack of Digital Skills: Many small business owners are unfamiliar with accounting software. Solution: Invest in basic training or work closely with a digital-savvy accountant.
- Software Costs: A lot of small business owners aren’t confident using accounting software.
- Resistance to Change: Not All Businesses Like Spending on Software: Buying new tools can be hard for some businesses. Find an option in software that grows with you, because much of it comes with a free plan.
- Data Migration Issues: It can be hard for many to move away from their usual spreadsheet routines. Show how automation makes things easier and more efficient, mainly when facing VAT deadlines.
The key is early preparation and using the right partners to guide the transition.
Practical Steps for UK Businesses to Get Ready in 2025
Ready to ensure compliance in 2025? Follow these steps:
- Check your VAT registration status and ensure you’re signed up for MTD.
- Select MTD-compatible software that meets your business needs.
- Set up digital record-keeping processes—invoice tracking, expense logging, etc.
- Train your staff or work with an accountant who understands MTD.
- Review your VAT process regularly to ensure continued compliance.
- Mark key VAT return deadlines on your calendar to avoid penalties.
HMRC has a list of recognised software providers, and many offer demo versions to trial before committing.
Conclusion
Compliance with Making Tax Digital for VAT will be needed by all businesses in 2025, as following these rules is no longer optional. Whatever your business type, ensuring your systems and routines are set up for Making Tax Digital compliance matters in managing your company.
For accountants, the Making Tax Digital for Accountants change is both a problem and an opportunity. Those who use digital technology and seek advice are reshaping their position and boosting the relationships they have with clients.
If you get ready early, you will calm your nerves, remain within the rules and enjoy all the benefits of today’s digital tax world.
Call to Action
Looking for help as you prepare for Making Tax Digital for VAT in 2025?
Talk to one of our staff members at Corient UK now or download our complimentary VAT compliance checklist.
No matter if you’re in business or accounting, we’ll guide you through switching to digital with certainty.